Core Insights - Bond yields in India hardened in August, with the 10-year benchmark government yield rising by 26 basis points to 6.62% at the end of the month, although it softened to 6.46% the following week [1][8] - Corporate borrowing from the debt market in August was the lowest in the past seven months, with India Inc and financial institutions raising ₹1.18 lakh crore, marking a 23% month-on-month and 12% year-on-year decline [8] - The Reserve Bank of India initiated a softer rate cycle starting in February, reducing the repo rate by a total of 100 basis points, which has led to a decline in various interest rates, including a 71 basis point drop in the weighted average lending rate for fresh rupee loans [6][7][8] Debt Market Trends - The issuance volume of commercial papers (CP) has decreased significantly, indicating that if bond yields continue to rise, corporates may withdraw from the debt market and seek funding from banks instead [5][8] - The first quarter volume of corporate borrowing was ₹4.54 lakh crore, an increase from ₹3.81 lakh crore in the same period last year, suggesting a potential shift in funding strategies among corporations [3][8] Banking Sector Response - Bankers are optimistic that India Inc will return to banks for immediate cash needs if bond yields remain high, with lenders like Canara Bank and Indian Bank preparing to disburse a significant amount of sanctioned corporate loans [5][8] - The regulator anticipates a higher degree of monetary transmission from the cumulative rate cuts as time progresses, which may influence corporate borrowing behavior [8]